April 13, 2004

Nanotech backers back off!

Nanobuild Ltd. issues liquidity warning

New York: Nanobuild, the world’s largest nanotech RTD company, was forced to issue a liquidity warning yesterday, as NIG, the association of users of nanoelectronic products, announced their intention to curb funding schemes for nanoelectronics research. The announcement comes as the latest in a series of similar revelations of major manufacturers this year.

“The current situation is anything but easy” said Jan Binkhorst, CEO of Nanobuild, at yesterday’s presentation of the half-year results. Nanobuild concentrates on nanodevices for electronic applications. The company’s shares fell more than 25% yesterday in late trading. The Advanced Technology Stock Index dropped 8%.

Nanotech research firms have been the high-flyers on the stock markets over the last five years. Now many of them are struggling to keep their research activities going. With almost all Wall-Street-listed nanotechnology firms reporting diminishing returns over the past 12 month, the sector is on the brink to get ‘nanomized’.

Analysts say that there are several reasons for the downturn. Andrezej Borkowski, chief analyst with Innovation Unlimited, the Warsaw based research think-tank, explains: “Some of the expectations in nanotechnology are only realistic on the long run. In the current difficult economic climate, firms concentrate more on short-term goals.”

After the initial enthusiasm about the potentially unlimited opportunities of nanotechnology, widespread caution is now common among executives and investors. Progress has been made in nanotechnology, especially with regard to smart materials. However, more complex nanotech applications are still far from the marketplace. Nanoelectronic components, for example, lack reliability to be commercially viable. The lack of internationally accepted measurement and testing standards is another reason why producers abstain from investments. “Metrology is one of the areas that governments need to address more aggressively. And the framework for the protection of Intellectual Property needs to be improved”, says Borkowski.

However, the recent plunge of stocks seems not to be supported by long term prospects. “Nanotech is the future. A lot of progress has been made with smart, functional materials and health applications. It is primarily in nanoelectronics where we see the market collapse”, says Borkowski.

According to analysts, the lesson to be learnt from faltering nanotech stocks, is that the policy framework has to be set right: Pushing the technology with the expectations of quick returns on investments is unrealistic in nanotechnology. First there needs to be strong emphasis on pre-competitive research, as Europe and the US did early in the century. Moreover, it is worthwhile thinking about the demand side at an early stage and to create lead markets. Here, the comparison between the US and Europe is instructive.

“In the US, military funded nanotechnology research addressed clear objectives. They set up programmes for combat textiles and virus-detection tools, for example. This had major impacts on innovation in the health sector. This strategy has paid off”,says Borkowski. The Nanopharma Research Program has been another case of US success. “We can see an increasing market-share of US products in medical technology such as intelligent drug delivery systems”, says Borkowski.

But Europe also has its strongholds in nanotechnology, especially in catalysts and hybrid materials. EuroCatalysis provides nanocatalysts for the chemical industry worldwide. “We make good profits with nanocatalysts and help Europe’s chemical industry maintain the competitive edge”, says EuroCatalysis spokeswoman Ana Oliveira.